Walmart sees room to grow in Target's home territory

Always a magnet and very often a lightning rod, Walmart seems to draw a crowd of commerce and controversy wherever it goes.

The challenges Walmart has faced are well-reported. It's been an ongoing target of organized labor, and has been criticized on issues of fair competition within communities and selling outsourced manufactured goods from low-wage third-world countries. But the world's largest company became that way for a reason -- lots of people shop there.

And as Bob Shaw reported in the Pioneer Press last month, when the Walmart in St. Anthony Village decamped to be remodeled into a larger SuperCenter location in Roseville, neighboring satellite stores decried the loss of an anchor tenant that pulled in customers for everyone.

Delia Garcia (Courtesy photo)

There was, it seems, plenty of business to go around.

The public love/hate relationship with Walmart seems a litmus test for the psychology of economics. Some people will defiantly refuse to shop at Walmart on principle; others rely on it for their daily bread at "everyday low prices" that are always convenient for those earning everyday low wages.

Walmart's history in Minnesota is enigmatic. Long thought to have ceded the state as "Target territory," in deference to its Minneapolis-based red-shirted rival, Walmart stores of various stripes now outnumber Targets in the state, when Sam's Club outlets are counted.

The Arkansas-based company is building a 300-job, 420,000-square-foot multi-state distribution facility in Mankato, designed specifically to deliver fresh groceries to a growing regional footprint.

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The company chose the Twin Cities as one of two U.S. test markets for its "Savings Catcher" program, in which customers log on after a Walmart shopping trip to see if any Walmart rivals had advertised lower prices. If such lower prices are found, on selected items, the difference is refunded.

While other retailers, including Target, have similar price capture programs, Savings Catcher builds up the refunded differences on a gift card -- all but ensuring the customer will make another trip to Walmart. The program goes national at the end of the summer.

In a recent visit to the Pioneer Press, Walmart's communications director for the Western U.S., Delia Garcia, answered questions about the company's Minnesota market, past and future, along with other issues.

Many of your competitors, Target, Supervalu and others, have strong historic footprints in Minnesota and the Twin Cities. Did Walmart consider this when expanding here?

"First off, I disagree with the assessment that Walmart 'ceded' this market to anyone. Really, the entire West is an opportunity for growth for Walmart, and that's why Minnesota is in our region for the West.

"We opened our first store in (Minnesota) in 1986. We have 82 stores now in the state, and that's in our various formats.

"We do look at competition, but I'd say we look at competition through the eyes of our customers. Is there a competitive advantage that we can offer customers as another choice for affordable groceries? It's really about the customer base and if we are able to offer them another option."

One of the major national criticisms of Walmart is that you sell goods that are manufactured abroad where labor is cheaper.

"I'd like to correct that notion about how we keep our prices low. We offer low prices because we operate on an everyday low-cost mentality, particularly in our logistics business and our distribution centers and those sorts of things.

"A very large percentage of our products are sourced in the U.S. And what we're finding in many cases, for some products, it is actually cheaper to manufacture in the U.S., for some of the textile industry products, for instance, than have to pay shipping costs from abroad, and not just from China, but other places."

Another criticism is that Walmart drives out smaller local competition when it moves into a community. How does Walmart view this tension?

"I have a couple of examples. We think we coexist very nicely, in the mall setting, with other retailers, where we are an anchor tenant with Target, Home Depot or with other large anchors.

"In Tucson, Arizona, we just opened a store that is an anchor for an old mall that they were revitalizing ... Target is an anchor on the other side of the mall, Home Depot is an anchor. We were the last piece. It was very good news for all the businesses because it does bring in more volume and more traffic."

Another point of contention that seems to follow Walmart has been its relationship with labor, with protests at stores that we've covered. Can you speak to that?

"The protests at Walmart tend to get a lot of media buzz, but what we find is the participation of actual Walmart associates is typically very low. It's really Our Walmart, which is not affiliated with Walmart, it's funded by the United Food and Commercial Workers union. We recently had a crowd of 50 at one of the protests, and maybe there were two Walmart associates there.

"We do focus a lot on what is the opportunity for our associates. Our average hourly full-time wage for Minnesota is $12.63 ... less than 1 percent of our associates nationwide make a state or federal minimum wage.

"We promoted about 170,000 associates a year to positions of higher responsibility and higher pay; 75 percent of our management teams started in hourly positions."

What about bringing unions and union organizing into your stores?

"They voted them down every time they had the opportunity. Because they don't need an intermediary to have a conversation with management. They have a direct line."

One of the biggest stories in retail this past year was the breach of customer data at Target. Did Walmart take any lessons from that?

"We have a pretty robust information security system. Our terminals in our stores have been enabled for 'chip-and-PIN' for years. We're now at the point where we can execute on that, and Sam's Club is the first step toward that, in terms of replacing the Discover cards, because the magnetic stripes can be counterfeited.

"So we're moving toward a co-branded card with MasterCard that is chip-and-PIN enabled. The initial phase will be chip-and-signature, but ultimately we support moving toward chip-and-PIN.

"Some of this requires a lot of coordination, with financial institutions and others, but we recognized that need years ago. We'll be rolling out chip-and-PIN technology to all our stores by the end of the year."